Not everything travels well. Regulations vary considerably from region to region. Cybersecurity laws range from non-existent through to draconian. If you’re a tax expert in one place, that doesn’t make you an expert everywhere else!
And yet, despite so many differences across business regions, the strategies in building and selling businesses are remarkably consistent. We’ve confirmed this through discussions with professionals in just about every time zone you can think of.
As you continue to think about building a business that you can sell one day, these business selling insights are invaluable.
From self-employment to a sellable business
Wherever you are in the world, the journey from self-employment to a sellable business looks similar. Small businesses typically start out as founder-operated entities that focus on a given service or product in which the founder plays a key role in designing and delivering. As the business scales, the founder trains up new staff and moves into a more managerial role. If things go really well, the founder eventually focuses only on strategy and finding a new CEO to take over.
The further along that road that a founder can travel, the greater the value created along the way. This doesn’t mean that there aren’t various exit points available along the way. It just means that each potential exit point is likely to be at a juicier valuation multiple than the previous one. There are other variables of course, like expected growth rates that can slow down as the business matures etc.
There are various stages of business along the way, all of which have different needs. We discussed this with John Barnes of Pendleton Street Advisors in this this podcast, a conversation which confirmed that there’s no silver bullet available anywhere in the world. Founders simply have no choice but to grind away, working through the different stages and hopefully making the right decisions along the way. John is based in South Carolina in the United States of America and works with entrepreneurs across various industries.
Hope isn’t a strategy – you need a proper plan
A business won’t scale by accident. This is a difficult journey that requires critical analysis of both the underlying products and the broader business strategy, ranging from go-to-market plans through to possible responses to competitive threats and all the other elements that make the difference between success and failure.
The old story of “hope is not a strategy” is incredibly appropriate here.
Huge Stafford-Smith of Vuka Works is a highly experienced sales executive with a particular passion for helping entrepreneurs design, assess, validate and (most importantly) activate business ideas. The power of critical thinking just cannot be emphasised enough. You can tap into his thinking in this podcast “Designing a business with Hugh Stafford-Smith, Vuka Works” episode, bringing you insights from the UK market.
Another benefit of planning properly is that you can be ready to exit at any point, which is a valuable option given the unpredictability of life. For more on this concept and why growing beyond the £1 million mark is so difficult, you can enjoy this podcast “Don’t fail to scale Cliff Spolander, Business by Design“. Cliff is based in the UK and helps business put in place plans to scale.
Don’t make it easier for buyers
When the big day comes and you’re ready to engage with buyers, all those years of effort will be thrust into the spotlight. The cliché of “sink or swim” doesn’t come close to doing this any justice. Like a sportsperson in the final of a major tournament, this is where thousands of hours of preparation gets distilled into a single outcome: win or lose.
Potential buyers for the business are going to find every possible reason to offer you less money, or to make the terms of the deal more favourable for them (at your expense). In an excellent recent podcast “How to buy a business with Ted Leverette, The Business Buyer Advocate“, Ted Leverette (who calls himself The Business Buyer Advocate – and that tells you a lot about what he does) kindly shared numerous insights to help sellers do better in negotiations. He only ever works with buyers, so the learnings for sellers on the other side of the negotiating table are truly invaluable.
Here are some of the mistakes he touched on that make things easier for buyers looking to get a great deal:
- Errors of omission – in many cases sellers are victims of not knowing what they don’t know, often because they weren’t properly advised.
- Sellers who trip over themselves along the way, focusing on the wrong things that don’t create value.
- Owner dependency that makes it very difficult to see a business that can survive the exit of the founder.
- Emotions in the selling process and being in love with the business that is up for sale.
- Incorrect preparation of lack of preparation at all, with too much focus put on preparing the business and not enough on preparing themselves for sale.
Give yourself the best possible chance
The common theme in all our discussions is that building a business for sale is all about proper preparation and excellence in execution. At bizval, we aren’t here to help with the latter. Instead, we can add tremendous value to the former by helping you understand the drivers of value and what plans might be needed to increase the valuation to a point where you are willing to sell.
In many cases, the right starting point is to get an idea of what your current valuation is. Contact us to discuss the optimal way to achieve that for you.